Crazy Equilibria: From Democracy to Anarcho-Capitalism

Imagine advocating democracy a thousand years ago. You sketch your basic idea: "Every few years we'll have a free election. Anyone who wants power can run for office, every adult gets a vote, and whoever gets the most votes runs the government until the next election." How would your contemporaries react?

They would probably call you "crazy." Why? Before you could even get to the second paragraph in your sales pitch, they'd interrupt: "Do you seriously mean to tell us that if the ruling government loses the election, they'll peacefully hand the reins of power over to their rivals?! Yeah, right!"

A thousand years later, the planet is covered with democracies. In most of them, defeated incumbents consistently make the "crazy" decision to peacefully walk away from power. In long-standing democracies, this pattern is so familiar we take it for granted. But we shouldn't. The viability of democracy is an amazing fact that begs for an explanation.

My explanation begins with a thought experiment. Picture a defeated incumbent in, say, Sweden. He summons his cronies to say, "So we lost a stupid election. Big deal! I say we refuse to cede power. If anyone protests, let's kill them." How would his cronies respond?

At first, the cronies would think their leader was joking. A bad joke, but a joke. If he persisted, though, the cronies would deem their leader crazy. The only help they'd offer would be to call his family... or a psychiatrist. If the Swedish leader pulled out a pistol and said, "If you're not with me, you're against me," his cronies would summon the police. If he kept waving his pistol around, the Swedish police would arrest him. End of coup.

The lesson: "Crazy" is relative to expectations. A thousand years ago, everyone was used to despotism. No one expected a defeated incumbent to voluntarily hand over power. As a result, refusing to hand over power didn't seem crazy. Since it didn't seem crazy, incumbents who refused to hand over power after losing an election probably would have managed to retain power. In modern Sweden, in contrast, everyone is used to democracy. Everyone expects a defeated incumbent to voluntarily hand over power. Refusing to hand over power seems crazy. As a result, refusing to hand over power would end not democracy, but the incumbent's career.

Why bring this up? Because like the democrat of a thousand years ago, I advocate a radical political change: anarcho-capitalism. After we've privatized everything else, I think we should privatize the police and courts, and abolish the government.

I know how crazy that sounds. I also know I'm not going to change anyone's mind about this in a blog post. This post has a more modest goal: to convince skeptics that one prominent argument against anarcho-capitalism is greatly over-rated. The argument: "Do you seriously mean to tell us that privatized police companies will peacefully settle disputes, instead of attacking each other until one firm becomes the new government?! Yeah, right!"

Given current public opinion, this awful outcome is awfully likely. Everyone is used to the existence of government. If the police were suddenly replaced by a dozen private police firms, people would expect CEOs to say, "Let's attack the competition and become the new government." Since people would expect this, many CEOs would expect such a proposal to succeed - and some would advocate it. Since these CEOs wouldn't sound crazy, many of their underlings would go along with their plan - and their plan (or a rival's) would probably come to fruition.

So far, so bad. Suppose however that a stable anarcho-capitalist system existed. Then this logic reverses. Since everyone is used to this system, people expect private police firms to amicably resolve disputes. In such a setting, a CEO who advocates a war of conquest would seem crazy - and his pleas to his co-workers would fall on deaf ears. In a stable anarcho-capitalist society, a war-mongering CEO doesn't get a war. He gets fired.

Since we've never had anarcho-capitalism, this peaceful equilibrium sounds like wishful thinking. But it's no more wishful thinking than stable democracy. Both systems sound crazy when first proposed. Neither can be stable as long as people expect them to be unstable. But both can be stable once people expect them to be stable.

You could object: The expectations necessary to sustain anarcho-capitalism are highly unlikely to ever arrive. But the same was true for democracy a thousand years ago. Yet somehow, expectations radically changed and stable democracy arrived. How did expectations change so dramatically? It's complicated. But can expectations change dramatically? Absolutely.

Comments and Sharing

Well, both the democracy and anarcho-cap critics have a point -- 1013 AD and 2013 AD probably weren't/aren't ready for their respective "crazy" ideas, and if they were implemented right now, they would fail. And while I'm on your side in wishing for the latter to occur, I think the road to it will be the same as the road to democracy from 1013: small steps along the way, each seeming less crazy over time.

And, like Greece, some parts will be implemented, then fail for one reason or another, then disappear, then reappear, over many years. I would not expect society to fully change its mind on this topic within our lifetimes.

Iceland has had a functioning parliamentary democracy since 930AD, and contemporary Swedes would probably have been aware of this. The argument in those days would probably have been that democracy does not scale beyond small countries like Iceland or Switzerland.

It's worth noting that we do have anarchy already, at the global level. And it works pretty much like you say---you have to be crazy to try to take over the world. It seems to me that it's worked out neither as well as anarcho-capitalism's supporters argue it would, nor as badly as its detractors argue it would.

The crazy thing is this: we already have private protection agencies, which do not attack each other, and we still have people who speculate that this is impossible.

Any city of reasonable size surely has more than one armored security firm, equipped with sturdy trucks, strong men, and lots of weapons. In theory, firm A could rob firm B and snatch a van with millions of dollars. In practice, they do not.

One might posit that the police of the city prevent this from happening, but isn't it possible that firm A and B would conclude, regardless of the police, that robbing competitors is a rather bad business model? After all, the other firm has the right to shoot back. The process of warfare is costly; in a competitive market, customers prefer firms which have less costly ways of doing business. Only states, which can prey on captive customers, can afford the luxury of war.

The Federal Reserve System is not a disaster because it is "partially privatized", but because it has been granted monopoly privileges by the government. If it were allowed to fail, if people were allowed to create competitors, the Fed would either behave far more competently, or go out of business.

For an example of the destruction of competition by government force, google the Liberty Dollar raid.

I'm pretty sure that the people of 1000 AD would be just as shocked by the idea that communism would work out well. And they would have been right.

"The fact that some geniuses were laughed at does not imply that all who are laughed at are geniuses. They laughed at Columbus, they laughed at Fulton, they laughed at the Wright brothers. But they also laughed at Bozo the Clown." - Carl Sagan

Democracy has limits. Essentially, the democratic process works when stakes are low and thus the loser can be expected to take it.

Thus, the democratic process requires consensus on certain fundamental things such as whether we should have a market economy or a communist one or there should be a state religion or not or whether slavery is to be legal or not.

Consequently, the democratic process does not work well if the fundamentals are themselves made to be decided by the democratic process. This produces serious alienation in the losers and creates a risk for non-democratic processes (i.e. secession or revolution) to commence.

Thus, the success of the democratic process involved buildup of consensus (aka "shared moral space"). It would be stupid to take the democratic process for granted. If consensus on fundamental things is lost, so would be democratic process in that particular nation or polity.

However here's a thought. In liberal democracies today there have been violent challenges to the democratic state, such as organised criminal groups who essentially seize and control areas, and terrorist or paramilitary groups. Parts of Northern Ireland were controlled by the Provisional IRA during the Troubles, for example.

Today, the state fights back against such challenges with police or army. Even with the power of the state behind them they sometimes fail; an internal British Army document admitted that they could not defeat the IRA militarily, for example.
http://news.bbc.co.uk/2/hi/uk_news/northern_ireland/6276416.stm

While CEOs might not fight wars with private armies, presumably criminal and terrorist groups will continue to seize areas and attempt to impose their will through force. An anarcho-capitalist society would still have to deal with them.

That's not to discredit anarcho-capitalism, only to say that presumably some groups in such a society would indeed be violent and expansionary, just as they are today, and would probably be locked in conflict with private security companies.

> Bedarz Iliaci Don't you think people may have beliefs such that robbing is wrong?

Well, it's not quite the same thing, but I think rampant piracy of music, books, and software by "nice, middle-class kids" holds some clue as to what happens when people think that that theft is risk-free.

My experience from 10 years ago - among children with easy means to pirate, and desire for the products (as evidenced by the fact that that *had* been spending money), piracy was in the 90% range.

About 1/3 - 1/2 could not see any ethical difference between picking the music up on Napster and getting the music from the musician for free. For those students, if they *could* obtain it risk-free for free, then it was ethical to do so.

The implicit metric is always "what things will enough people to rise up and kill you for trying?" In 1013 AD, seizing power via men with swords was not on that list, but doing it without a proper claim to the throne would usually cause enough other people (usually other nobles with better claims) to rise up and try to kill you.

Same with borders: today, Queen Elizabeth II has a valid medieval claim to rally her troops and storm the USA, reclaiming land that was, by the standards of 1013, wrongfully stolen from her.

The question is always, what do a sufficiently powerful group of people believe "wrongfully" means. Today, enough don't believe that claim that if she tried it, it would fail (whether it would succeed militarily is immaterial). But that's the only reason.

So yes, full anarcho-capitalism is impractical now because people believe it will be, but we do have some parts of it now -- and later on, more will, depending on how successful Prof. Caplan (and others) are at convincing people to A) not use violence against an-cap societies and B) threaten to use violence against previous forms of government. Because that's what an election is: "you will step down after 4 years and defer the person we cast the most votes for, or else... enough people will rise up and use force to make you."

Another great post. Thanks! I'd love to hear more about the "it's complicated"...how expectations changed so dramatically regarding democracy and peacefully surrendering power.

Normalcy bias and hindsight bias are problems. And most people probably have to be suffering enough to care enough to even think about something radically different.

The earlier comment about the IRA is useful. I understand and for the most part, agree that the IRA a terrorist organization. But I'm sympathetic to the desire to represent Irish interests in a way different from how the British have represented them for the last several hundred years. Thankfully, my Irish Catholic mother had an exit option, left Belfast and came to this country. But my grandparents chose to live with hunger and physical violence...exit is usually expensive.

The government of Israel was essentially anarcho-capitalist before it chose kings. The law is revealed in the books Exodus through Deuteronomy and the history in the book of Joshua.

The nation had no king, executive branch, legislative branch or standing army. Private property was sacred. Judges ruled, but only through the court system.

The law was divided into religious, moral and civil law. The courts dealt primarily with the civil law. The priests handled religious law and moral law was left to individuals. The courts did not enforce the poor laws or Jubilee, the return of land to the original owners after 49 years.

The period under the judges lasted about 450 years and was far more peaceful than the period under the kings, and probably more prosperous as well.

>The Federal Reserve System is not a disaster because it is "partially privatized", but because it has been granted monopoly privileges by the government. If it were allowed to fail, if people were allowed to create competitors, the Fed would either behave far more competently, or go out of business.

I suspect that the wealthy people who fund anti-Fed propaganda in the U.S. view the Federal Reserve System as a crony capitalist deal which went to the "wrong" cronies instead of going to people like themselves. (The Bilderberger and billionaire Peter Thiel funded Fed critc Ron Paul's presidential run, for example.) They want to discredit and destroy the Fed so that they can establish a central banking system to replace it which they can control.

I suspect we live in an aberrational time in a lot of ways, and that we'll see the regression to longer-term social patterns based more on hierarchy, aristocracy and patriarchy than on egalitarianism, democracy and feminism. Those science fiction stories set in "the future" which postulate noble houses, feudalistic social structures and male-dominated families may be more prescient than we realize. Nassim Nicholas Taleb has written recently that if a cultural practice has lasted a long time, for example, patriarchy, we shouldn't dismiss it as "irrational" based on current beliefs about enlightened thinking and progress, just because we don't understand the how it operates and how it has kept the human species in business in a harsh world. Patriarchy might exist and endure for some good but nonobvious reasons, and we shouldn't just assume that we can jettison it without incurring social costs. Nor should we assume that it will just mysteriously discontinue.

Seems quite reasonable that private police and courts could be bootstrapped by the existing government police and courts, acting in a supportive, then supervisory, then peer, then non-existent capacity. (One might wonder if the final step would ever happen due to the Iron Law, but certainly they'd be enough reduced by then that it's about the same.)

In fact, private police and judicial systems already exist, in the forms of security companies (in various names and specialities) and mediators, and are in significant use an various arenas. They are theoretically regulated and fundamentally enforced by the government arms, but in practice rarely need to be. Doubtless their scope would expand if it were allowed (since the government police and courts maintain monopolies on many functions--largely in criminal law.)

Anyway, the idea that privatized police would lead to those entities "taking over" is a bit odd, in that it's not so much police power but military power which is the real monopoly of force. When the locals act up, what's the governor's (or president's) option? "Call up the National Guard." Of course, that's not available in true "anarcho-capitalism", but it would be in a transitional state (which could exist until such a situation became normal and expected).

As Fazil Majid rightly notes there was a functioning democracy that a 1013 dreamer could point to. (Icland decided to becomae Christian by vote in 1000.) As there are functioning roving bands of private enforcers an anarcho-capitalist can point to in 2013. Gangs in downtown Baltimore for example.

The problem with any system is that we really do not know what seeds of their own destruction they contain- and they all do - until we put them through the test of time and practice.

The "democratic" idea as presented a thousand years ago is not as 'crazy' as it is simplistic, and as it is implemented in slow steps through a thousand years the "seeds" of its own destruction are eventually discovered - that it is a huge monstrous "Vote-Buying-Machine" that corrupts as it goes along.

The best thing that the "Anarcho-Capitalism" idea has going for it is that it is as simplistic as was "democracy" then and we won't discover its ultimate unintended consequences until we put it to the test of practice and time.

But it is the failure of "democracy" in its present form, of massive and blind one-man-one-vote with its corruptive vote-buying potential, that will open the door to an alternative, of that we can be sure. Too bad that I can not make a bet and live long enough to collect.

To continue Ken B's line of thought, why are inner city gangs, mafia families, and drug cartels not anarcho-capitalists? They don't bow down to a central authority, and they are primarily motivated by profit. I'm pretty sure that the majority of regular citizens living in the areas where they hold sway don't approve of them, and yet that doesn't matter.

I think your argument demonstrates incredible survivor bias, ignoring all the other crazy ideas that went badly, ignoring the times democracy didn't transition properly (French Revolution, Nazi Germany, many elections in Pakistan, etc.).

Arvind, I think that religious millenarians have made your argument.
"Oh critics of theocracy show a misunderstanding between theocracy and church rule. In a proper theocracy, like we want, all the laws will be just and not subjective like those churchmen had." You can't just define the problem away.

My own view in a nutshell is this. The relative success of constitutional democracy is a strong argument against anything else. We have mainly tamed the beast. It still snarls and bites, but compared to most of history we have it mostly tamed. It shows a real lack of historical perspective to not appreciate that, value it, and fear losing it.

You confuse people not agreeing with you with people misunderstanding you.

The natural law tradition that I am aware of always realized that there needs to be a positive law that instantiates natural law principles in a concrete society. Friedman thinks you could have competing agencies providing that positive law, but the difficulty is that competing for the business of plaintiffs leads in a different direction from competing for the business of defendants. Consensual arbitration can work if there is an ongoing relationship that matters more to the parties than the result of a particular dispute, but it doesn't scale unless there is a backstop of an entity whose jurisdiction you don't get to choose.

All social mammals have a dominant alpha. Including primates. Including apes. Including humans. Every governmental system allows the alphas to express their desire for power. In democracies, we created a ritual that allows for the peaceful transition of power from one alpha to another -- allowing the alpha to exist, but making it so that he ironically lost power unless he gave up power.

I want very much to be an anarchocapitalist. But I don't know what to do with the alphas. Democracies solve this problem. Anarchy by definition could not, as it posits a world in which the majority social submissives exist without any alpha. That is, I don't think anarchy is crazy -- in fact, I think it is highly desirable -- I just wonder if it is sociobiologically possible. I want someone to address this issue, and I have yet to see anyone do so.

"I want very much to be an anarchocapitalist. But I don't know what to do with the alphas. "

Instead of having very powerful and non-local alphas, we would have a myriad of them. And they would not be necessarily bloody warlords: democracy has shown the possibility of "domesticating" these alphas.

Your distinction between our democracy and whatever there was 1000 years ago, may not be so different nor as unambiguously toward the direction of freedom as you imply. The size and permanence of the bureaucracy in democratic countries is both daunting and power consuming.

I would like to believe your idea is plausible in the long run. It is certainly imaginable. But.....it assumes away the tendency for people of different beliefs and interests from threatening and ultimately fighting each other. The threat of war feels embedded in human nature.

Bryan,
This is precisely why I decided to write Sharper Security as a work of near-future science fiction, rather than try to explain things as non-fiction.

The first step is to get people used to the idea of an anarcho-capitalist society, to get them a better instinctive understanding of how the rules and incentives could work. That's the major obstacle to potential implementation.

It's not trying to convince people of abstract policy advantages, it's trying to allow people to get a better feel for how it could exist and function in reality. And by people, I mean regular people who otherwise would have never heard of it. After all, that's how the leftists have changed our culture at least once. Isn't it time we started fighting for our own ideas?

I keep meaning to already, but I'll come up with an address for you and send you a copy of the book to review sometime in the next few weeks.

We have a similar problem now to one you describe as non-existent. The politicians and the bureaucracy may cede power to each other willingly, but they strongly resist relinquishing power to those outside of their group.

Also, they continually take authority never granted them by anybody and expand it, without giving any of it back.

Marriage licenses are an example. Before licensing that was fully in the hands of the people partaking. After marriage licensing, government tried to pick and choose who can be married. Ending the race component did not end the use of the marriage license for government discrimination. The current debate on homosexual licensing does not change that one bit either.

Elected governments constantly expand their tax impositions, expand their authority, and shirk their responsibilities once they have their powers. Like the streets of New York and the Mayor Koch pothole ordinance. Or monopoly police power, with no responsibility/consequences at all to protect anybody.

I have the same dream you do, but I am not seeing a path out of the over-control statism that exist now, even in the USA.

"I also know I'm not going to change anyone's mind about this in a blog post."

Unfortunately you're incorrect on this Bryan. You have very much changed mine. I have to admit one of the few arguments I had left was the one you addressed - that private companies would fight eachother and become new Governments.

---
"I want very much to be an anarchocapitalist. But I don't know what to do with the alphas."

Surely you don't believe that all human alphas must participate in the political process to properly express themselves? Granted, many do, but what about big important CEOs and Entrepreneurs? There's an incredible variety of outlets for alphas to express their "superiority". You can still be in charge of a variety of institutions and organizations in a voluntary manner. Today, they express themselves in all sorts of ways, often political, but also private or illegal.

---
"Well, it's not quite the same thing, but I think rampant piracy of music, books, and software by "nice, middle-class kids" holds some clue as to what happens when people think that that theft is risk-free."

I think you're confusing trends. The piracy of music, books, and software aren't evidence of what happens when people think that theft is "risk-free". Instead, it's evidence of what happens when people think that theft is "victim-free".

Would those same nice, middle class kids steal from a store if they knew there was no police to call? I very much doubt it.

I think we unfortunately are already on our way to a from of Anarcho-Capitalism and it looks a lot like the feudalism of the past. Large holdings of private property and the means of production by a few mega- corporations and banks. The control of money, finance and public policy by these few behemoths. sovereign states in debt to the private bond markets and individuals with their best opportunities relegated to becoming Vassals of these authoritarian rules Lord corporations while debtors , like students, and others are left paying peonage and debtor countries sell off prized public assets to private interest. A whole network of institutions, schools, think tanks, economist, talking heads, lords and knights to prop up and propagandize for their Lords. Products are produced more on profitability rather than consumer preference or societal need ( ie continued use of fossil fuels over more sustainable alternatives). Control of the media, the courts and on and on. No professor....look around.... Your radical dreams are coming true.

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Troy: I don't know what to do with the alphas. Democracies solve this problem.

I don't think it does. Here's the quote of the day from Cafe Hayek:

Unless constitutional rules impose restraints, majoritarian democracy is not a move out of the Hobbesian jungle; instead it is merely a shift of the fighting to a new location.

But I think what you're saying is that unless a super majority agrees with the principles of anarcho-capitalism it won't survive. And that is true and a major weakness of the philosophy.

As the history of Israel in the OT demonstrates, when the alphas decided they wanted a king, they got one and the oppression that came with him.

But that is true of any system. If the majority change, the system will change. The most robust form of government has been the traditional monarch/caesar/dictator who the alphas support in exchange for the freedom to plunder the masses.

"Funny how anarcho-capitalists want to privatize everything, yet they consider the partially privatized Federal Reserve System an ongoing disaster."

You're conflating privatization with outsourcing. The Fed is essentially a government contractor. It's a reason Lockheed and formerly Blackwater are probably being overpaid, and why the 'privatized' prisons are full of corruption.

There's a huge hindrance to the market in money creation because of the interventionist legal tender laws and the Federal Reserve Act.

The thoughtful ancient objection to democracy may not have been "why would the dictator step down", but rather "why would the army NOT back up the dictator who wishes to keep power". This seems to focus the problem not on general social norms so much as the opinions of one narrow group: the generals, leading us to trace the flow of their paychecks to discover how their loyalty is determined. All this leads me to believe that the ancients needed to understand public choice to understand 1. why the dictator stays in power, and 2. why a democracy can function.

As for An-Cap, the question becomes one of opportunity costs. An established private military considers the costs of establishing a monopoly through force over it's area versus more peaceful means of acquiring wealth. I personally don't think the odds are that good for a stable an-cap.

Most people here seem to be discussing a sort of nationalist anarcho-capitalist state.

As if the whole geographical territory of the current U.S state were to be converted to the new (an-cap) monopoly jurisdiction.

Anarcho-capitalism exists wherever there is free exchange, and that happens already today in millions of ways. The imposition of costs to freely exchanging individuals by third parties such as government is a relic from our barbaric past. This impulse to steal&control will be gradually conquered by pockets of civilised people withdrawing from the centre (future technology e.g new energy sources will make this much easier), creating their own communities, servicing their own communities through market transactions. I sincerely hope our friends on the left will also manage to secure regions in which they can flourish.

As has been pointed out, there was democracy in the 11th century and there were numerous examples of lng, relatively succesful democracy or government with democratic elements throughout history medieval folks could point to. The bible even speaks well of the Roman Republic (1 Maccabees 8). No one argued democracy was impossible, they argued (and by "they" I mostly mean the writers of the Carolingian renaissance, which produced the only medieval political theory to speak of before the 12th century) 1. that christian humility demanded that people obey rulers, not vice versa, and 2. that good rule is Christian rule, and this is best brought about through a single, just, David-like king.

In other words, the reasons for rejecting democracy would have been theocratic and wrong, not practical, culturally contingent, and correct.

In contrast, there is no Athens, no Iceland, no roman republic for anarcho syndicalists to point to. So the "it is against human nature and the system will instantly collapse" argument is much stronger than it would be if made by a medieval dude trashing on democracy. Which is probably why medieval dudes did't make those arguments!

While I think the general point is a good one I still wonder if the specific example isn't poorly chosen.

Who are we asking back in 1013? Europe -- we really don't have too good an idea of the total political structure back then. Moreover, we probably misinterpret a great deal of what evidence we have. For instance, Bryan suggests that the period was undemocratic. If we asked someone from the Hansa about such democratic governance process what would their reaction be? What about larger towns and cities that were independent entities -- that is not owned by the local lord? What about all the various Guilds -- both trade and crafts?

Government, as well as markets, were significantly different from today and the rule generating process was also a bit different.

Coincidentally enough, Dr. Caplan's self-described "favorite philosopher" Michael Huemer presented a paper in support of this very topic at the Ayn Rand Society meeting of the American Philosophical Association in San Francisco on March 30. Critiquing him (contra anarcho-capitalism, as is the Objectivist position) was Dr. Harry Binswanger of the Ayn Rand Institute. Apparently the papers and presentations were very good, but sadly they aren't available unless you are a member of the Ayn Rand Society of the APA. They are said to be in the queue to be published in the journal Ayn Rand Society Philosophic Studies by the University of Pittsburgh, but that may take a year or two. Fortunately, Dr. Binswanger has published some thoughts on the matter at http://www.hblist.com/anarchy.htm.

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